Shares in Sainsbury’s rallied this week despite sales growth slowing in its first quarter amid a tough consumer backdrop.
Like-for-like sales, excluding fuel, increased 2.1% to £9.2bn in the 16 weeks to 20 June, down from 3.1% growth in the previous quarter and a 4.7% jump in the same period a year ago. It follows a similar slowdown at Tesco – which recently reported a 1.8% increase in sales for the three months to the end of May – as depressed consumer caution and the Iran war weighed on the industry.
However, Q1 growth at Sainsbury’s did come in ahead of City consensus thanks to a better-than-expected 3.6% rise in grocery sales to £7.6bn and a resilient performance at Argos, where a run on buying fans to cool off in the heatwave and large-screen TVs for the World Cup helped offset seasonal weakness elsewhere.
And warnings by CEO Simon Roberts earlier in the year about the potential for pressure on discretionary consumer spending to hit the bottom line failed to materialise as Sainsbury’s held firm on guidance for the year of operating profits of £975m to £1.1bn.
The combination of better-than-expected results and profits outlook sent shares up 3% in early trading on Wednesday morning. The stock is up more than 7% this week to 337.2p, approaching levels last seen in April.
GlobalData analyst Eleanor Simpson-Gould said the unchanged outlook suggested the supermarket was “confident with its competitive positioning, but not complacent about external shocks”.
Dan Coatsworth at AJ Bell said even though Sainsbury’s was “finding life a little harder” in the first quarter, the drop off in growth wasn’t disastrous as the chain continued to strike a chord with cost-conscious consumers and those and willing to spend a bit more on fancy items.
Sainsbury’s outperformed struggling rivals Morrisons and Asda in the quarter and continued maintain its competitive position against the discounters thanks to its Aldi Price Match and Nectar Prices on 11,000 products.
Its premium Taste the Difference own label range, which launched 380 new products, continued to register strong growth, with sales up 6%, and the fresh offer outperformed the market, with sales up 5%.
RBC analyst Manjari Dhar was “encouraged” by the progress Sainsbury’s made in improving its price-value credentials and added work to showcase the food range better, combined with a more curated general merchandise offering, was supporting good volume market share gains. “We expect this to continue through the rest of 2026,” she said.
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